2023 (8) TMI 541 - AT - Service Tax

Short payment of service tax - availed exemption from the gross amount received towards the services rendered by them to the units located inside the SEZ, exemption provided by N/N. 4/2004-ST dated 31.3.2004 - the notification was superseded by Notification No. 9/2009-ST dated 3.3.2009 - recovery alongwith interest and penalties - HELD THAT - N/N. 9/2009-ST dated 3 March 2009 supersedes the older N/N. 4/2004 by providing for exemption from the levy of service tax in respect of the taxable services rendered to SEZ Developers and SEZ Units by way of a refund. Notification 9/2009 has in a change of policy modified the earlier procedure of automatic exemption from payment of service tax provided in relation to the authorised operations in a SEZ under the SEZ Act. Exemption of service tax under the new notification is by way of a refund and is subject to the various conditions enumerated therein. The appellant is of the view that the main portion of the Notification exempts the levy itself and that the proviso contemplates that even if tax or duty is paid, the exemption is available in the form of Refund. This is not a proper reading of the notification. The exemption provided by the notification is circumscribed by the proviso. There is no scope for intendment. Plain words of the notification must be given meaning to. It cannot be read disjointedly in different parts - the same basic rule of interpretation applies to a notification too. It is within the remit of Government to change a policy keeping in view the economic conditions, financial constraints and many other administrative and other attending circumstances. Hence when an exemption of service tax is made under a new notification which replaces an old notification, the grant of exemption/ refund is subject to the various conditions enumerated therein. The contention of the appellant is hence devoid of merit. Though the show cause notice was dated, 11.09.2009. the same was received only on 04.05.2010 - HELD THAT - The impugned order also only examines the date of receipt of OIO, which is not relevant to determine the question of time bar. Hence this matter which was not brought for consideration to the Original Authority by the appellant needs to be examined by him along with the available evidence. Penalty - HELD THAT - The appellant was earlier availing exemption under Notification No. 4/2004-ST dated 31.3.2004 which got superseded by Notification No. 9/2009-ST dated 3.3.2009. The exemption availed was reflected in the ST-3 returns and the demand is also only for the period of March 2009. The short-payment was noticed during the scrutiny of the ST-3 returns and was a genuine mistake. Hence no penalty is imposable in this case. The demand of duty and interest made in the impugned order is as per law - Penalty set aside - with regard to the issue of time bar as per the normal time limit i.e. the matter regarding the receipt of Show Cause Notice by the appellant within normal time or whether time-barred alone is remanded to the Original Authority to be decided after giving sufficient opportunity to the appellant to state his case both in writing and orally as per law - appeal allowed in part and part matter on remand.

Summary

Issues involved: Interpretation of exemption notification, Time bar of show cause notice, Imposition of penalty

Interpretation of exemption notification:
The case involved a dispute regarding the interpretation of Notification No. 9/2009-ST dated 3 March 2009, which superseded Notification No. 4/2004. The appellant contended that the main portion of the notification exempted the levy itself, while the department argued that the exemption was subject to conditions enumerated in the notification. The Tribunal held that the exemption provided by the notification was circumscribed by the proviso and must be interpreted based on the plain words of the notification. The Tribunal emphasized that the grant of exemption/refund under a new notification replacing an old one is subject to the conditions specified therein. The appellant's interpretation was deemed devoid of merit based on legal principles and the specific wording of the notification.

Time bar of show cause notice:
Regarding the time bar issue, the appellant argued that although the show cause notice was dated 11.09.2009, it was received only on 04.05.2010. The appellant contended that the date of service of the show cause notice was crucial in determining the period of limitation for issuing the notice under Service Tax Provisions. The Tribunal noted that this issue was not raised before the Original Authority and was not relevant to determine the question of time bar. The matter was deemed to require further examination by the Original Authority with the available evidence, as it was not previously considered.

Imposition of penalty:
In relation to the imposition of penalty, the Tribunal observed that the appellant had previously availed exemption under Notification No. 4/2004-ST, which was later superseded by Notification No. 9/2009-ST. The Tribunal found that the short-payment of service tax in March 2009 was a genuine mistake discovered during the scrutiny of returns. Consequently, the Tribunal concluded that no penalty was warranted in this case. The decision to set aside the penalty was based on the genuine nature of the error and the specific circumstances surrounding the short-payment.

Conclusion:
The Tribunal upheld the demand of duty and interest as per law but set aside the penalty due to the genuine nature of the error. However, the issue of time bar concerning the receipt of the show cause notice was remanded to the Original Authority for further consideration. The appellant was to be given an opportunity to present their case both in writing and orally. The impugned order was modified accordingly, and the appeal was disposed of based on the above terms.